On Wednesday, the Fast Money traders were keeping a close eye on the broad market weakness after disappointing economic data triggered a sell-off in both the S&P and the Dow, despite headline making mergers, which should have generated at least some optimism.
You'd expect investors to be cheered by reports that, Applied Materials snapped up rival Varian Semiconductorfor $63 per share - a 55% premium. Or that ConAgra raised its offer for Ralcorp to $86 from $82.
However, investors largely ignored those bullish catalysts and focused on weaker than expected jobs data as well as the latest ISM number, which showed non-manufacturing growth hit its slowest pace in eight months.
The action suggests investors are growing worried that the recent rally, which pushed the S&P to a bull market high, has reached levels that may not be supported by economic fundamentals. As a result, recent winners, including the energy and materials, were among the day’s biggest losers.
Is the sell-off getting serious? How should you position now?
Instant Insights with the Fast Money traders
Trader Patty Edwards is growing very cautious. She’s focused on 1340 on the S&P. “If we go below that level we may be looking at a reverse head and shoulders pattern.” That’s a very bearish chart pattern that triggers concern among technical traders.
Edwards counsels trading conservatively until the market tests 1340; position accordingly based on whether it holds or breaks.
Trader Steve Cortes shares Edwards’ skepticism. He tells the desk he’s short almost everything on his screen expect bonds. Cortes thinks the break in silver is material. (As you may know silver is poised to make its biggest 3-day drop since 2008.)
In fact, Cortes thinks silver’s sharp reversal will have an impact far beyond precious metals. “It will have an impact on the whole universe of risk-taking,” he says. “It’s the first of the speculative trades to unwind and will probably pull other markets down with it.”
Trader Brian Kelly doesn’t buy it. He says, “although the momentum is down don’t panic out of it. I still like this market.” He believes the fundamentals remains in tact. And he points to another reason to remain bullish stocks. “If the economy continues to get weaker the Fed should remain accommodative, positive for stocks, positive for precious metals and negative for dollar,” he says.
Anthony Scaramucci falls in Kelly’s camp. Although he thinks the action into Wednesday'sclose could be sloppy, he believes the market will continue to trend higher.
And if you’re looking for a stock pick, Scaramucci suggests taking a second look at Pfizer – one of his Hedge Fund Trades of the Week. “It should hold steady in a choppy market,” he says.
Intel landed on the trader radar after the company introduced a new manufacturing process that could be a game changer.
The new technology -- code named Ivy Bridge -- crams more transistors onto silicon chips, a technology that will help it catch up in the red-hot tablet and smartphone market.
What’s the trade?
Patty Edwards suggests keeping an eye on these new developments. "Whenever there’s break through technology it gets interesting."
Anthony Scaramucci is also bullish. He reminds the desk that Intel was a former Hedge Fund Trade of the Week. "They just need a little wind at their backs," he says. This may do the trick.
CALL TO THE FLOOR: AGRIUM
Ag names took a bit of a hit on Wednesday on the back of seed and fertilizer producer Agrium's weak second quarter guidance.
By the numbers Agrium forecast earnings of $4.40 to $4.90 per share for the first half of 2011. The average consensus estimate had been at the upper end of that range.
Is this a sign that the ag trade's losing steam?
Find out from the source. Check out our interview with Agrium CEO Michael Wilson. Watch the video now!
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Trader disclosure: On May 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Cortes owns (EXC), (SO) and (GS). Steve Cortes is long USD vs. JPY. Steve Cortes is short (F). Steve Cortes is short (AXL). Steve Cortes is short EEM vs. SPY. Steve Cortes is short Nasdaq futures. Steve Cortes is short EUR/USD. Steve Cortes is short EUR/CHF
Edwards is long (AAPL) for Clients
Edwards is long (GLD) for Clients
Edwards is long (AZO) for Clients
Edwards is long (MSFT) for Clients
Edwards is long (SLV) for Clients
Edwards is long (TEVA) for Clients
Accounts Managed Brian Kelly Capital own (GLD)
Accounts Managed Brian Kelly Capital own (SLV)
Accounts Managed Brian Kelly Capital is long (MCP) calls
Accounts Managed Brian Kelly Capital own (DIA)
Accounts Managed Brian Kelly Capital own (EBAY)
Accounts Managed Brian Kelly Capital is long euro
Skybridge Capital is a Fund of Funds Manager
Funds Held May or May Not Own the Recommended Securities
CNBC.com with wires.